Supply chain optimisation is at the heart of a four year plan by Kellogg’s to save up to $475 million a year by 2018.
The company estimates that by the end of 2017, Project K will reduce the company’s global workforce by about seven per cent.
It said optimisation of supply chain infrastructure would include actions designed to increase efficiency and improve margins, including the consolidation of facilities and the elimination of excess capacity.
In addition, it said: “Global Business Services will create increased productivity throughout the organisation… And a new global focus on categories will include the continuation of a process designed to create a regional, category-based model.
The company anticipates that the programme will result in total cumulative, pre-tax charges of between $1.2bn and $1.4bn; and the programme’s non-cash costs are expected to be between $275m and $325m.
Cash savings are expected to reach an annual run-rate of between $425m and $475m in 2018.
“We are excited by the potential and opportunities we see for growth in the categories in which we operate,” said John Bryant, Kellogg Company’s president and chief executive officer.
“As a result, we are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth. These actions will set a foundation for our Sustainable Growth operating principle.”
Kellogg Company reported flat third quarter 2013 reported net sales at $3.7 billion.
Reported quarterly operating profit was $504m, a decrease of 1.7 per cent. Underlying internal operating profit increased by 0.6 per cent.